Question

Practice Round - Opening entries 1. Sold 200 shares for $15 each (par value) 2. Purchase supplies on account for $200 3. Set up an investment account for $600 (interest = %10 per year) 4. Received a deposit from a customer paying in advance $350 (work will be done later) 5. Purchase equipment for $1500 with cash (R.V. = 300. Useful life = 4 years) 6. Purchased inventory (100 units) for $10 each on account. 7. Prepaid insurance for the year with cash $400. 8. Prepaid rent for the next 6 months with cash $300 9. Borrowed $2000 and signed a notes payable for 5 years (interest = 8% per year)

Answer 1

		T-ACCOUNTS
	CASH
	Ref	Description	Debit	Ref	Description	Credit
	1	Common Stock	$3,000	3	Investment	$600
	4	Unearned Revenue	$350	5	Equipment	$1,500
	9	Notes Payable	$2,000	7	Prepaid Insurance	$400
				8	Prepaid Rent	$300
		Closing Balance	$2,550
	INVENTORY
	Ref	Description	Debit	Ref	Description	Credit
	6	Accounts Payable	$1,000
	SUPPLIES
	Ref	Description	Debit	Ref	Description	Credit
	2	Accounts Payable	$300
	INVESTMENT
	Ref	Description	Debit	Ref	Description	Credit
	3	Cash	$600
	PREPAID INSURANCE
	Ref	Description	Debit	Ref	Description	Credit
	7	Cash	$400
	PREPAID RENT
	Ref	Description	Debit	Ref	Description	Credit
	8	Cash	$300
	EQUIPMENT
	Ref	Description	Debit	Ref	Description	Credit
	5	Cash	$1,500
	ACCOUNTS PAYABLE
	Ref	Description	Debit	Ref	Description	Credit
				2	Supplies	$300
				6	Inventory	$1,000	(100*10)
					Closing Balance	$1,300
	UNEARNED REVENUE
	Ref	Description	Debit	Ref	Description	Credit
				4	Cash	$350
	NOTES PAYABLE
	Ref	Description	Debit	Ref	Description	Credit
				9	Cash	$2,000
	COMMON STOCK
	Ref	Description	Debit	Ref	Description	Credit
				1	Cash	$3,000	(15*200)
		TRIAL BALANCE
		ACCOUNT	DEBIT	CREDIT
		Cash	$2,550
		Inventory	$1,000
		Supplies	$300
		Investment	$600
		Prepaid Insurance	$400
		Prepaid Rent	$300
		Equipment	$1,500
		Accounts Payable		$1,300
		Unearned Revenue		$350
		Notes Payable		$2,000
		Common Stock		$3,000
		TOTAL	$6,650	$6,650